UK milk production closes strong in the first quarter amid margin tightness

Milk production in the United Kingdom continued to expand during the first quarter of 2026, supported by improving milk solids content and strong year-over-year growth in collections. However, weakening farmgate milk prices and rising production costs are increasing financial pressure on dairy producers, which could begin to weigh on production incentives in the coming months. Meanwhile, processors are adjusting milk pricing strategies to balance market uncertainty with abundant milk supplies across Europe.Milk collections in the United Kingdom (UK) reached 1.4 billion liters in March. Although this represented a 2.3% increase compared to the previous year, it also marked a slowdown from the 3.9% annual growth recorded in January and February. That said, growth during the first quarter of 2026 remained notable, with milk output rising by 3.4% year over year to 3.95 billion liters.At the same time, the nutritional content of milk improved. Fat content averaged 4.45% in March (+1.8% YoY), while protein levels increased to 3.49% (+2.2% YoY). As a result, quarterly growth in milk solids (MS) output accelerated to 5.4% year over year, faster than the increase in overall liquid milk production.Despite the slight deceleration in March, UK milk production has recorded significant growth over the past year, placing continued pressure on farmgate milk prices. In March, milk prices averaged 35.05 pence per liter (ppl), down 2.4% from the previous month and 21.9% below the level recorded a year earlier. The decline in prices is weighing on farmer margins and reducing incentives for further production expansion.The weakness in milk pricing has been compounded by rising production costs, with geopolitical tensions in the Middle East contributing to higher fuel, fertilizer, and feed prices. As of March, Defra reported increases in several key feedstuffs, including feed wheat (+2.3% MoM), feed barley (+0.4% MoM), and soybean meal (+6.8% MoM).According to Farmers Weekly, the conflict could increase milk production costs by 2.1 ppl, placing the breakeven milk price between 40 and 41 ppl. Compared to the average farmgate milk price recorded in March, this suggests that a significant number of producers are operating below breakeven levels. This could potentially lead to lower milk production, ranging from reduced feed usage to increased herd culling.Moreover, forage production conditions appear to have shifted from favorable in March and early April to more challenging in late April and early May, with grass growth averaging 55.2 kilograms of dry matter per hectare. This could limit forage availability for dairy production, despite forage typically representing one of the cheapest nutritional sources for dairy herds. Processors have responded to the heightened uncertainty. Arla reported a 1.76 ppl increase in the price of conventional milk, reaching 35.83 ppl in May. Meanwhile, Müller and First Milk will maintain stable prices until June at 34.5 ppl and 30.75 ppl, respectively. These strategies reflect both uncertainty in international dairy markets and the abundant milk supply across the rest of Europe.